December 2nd, 2008

State Budgets Suffering Without a Money Tree


photo credit: pfala

A “fiscal emergency” has been declared by the Governator, throwing light on economic panic in a mismanaged state. Suddenly California finds itself in the hole to the tune of $11 billion.

But the Golden State is not alone in its financial crunch, being joined by nearly every other state in the Union during what has now been “officially” recognized as a recession.

Unfortunately for all of the governors, they lack possession of a key resource that has become the crutch of reckless spending and ballooning government at the federal level: the money tree. Unlike Congress, state legislatures are forced to walk a delicate balance between direct taxation and their mandated expenditures and pet projects. Without the ability to create their own money and tax citizens through a hidden inflation tax, they (usually) must restrain themselves lest their constituents revolt and boot them out of office.

But never fear, America! The Obamessiah is here to not only pay your mortgage, but also to balance the budgets of sovereign states through a federally-created infusion of newly-printed cash!

One might expect a partisan division from such a policy declaration, with Republicans (once the small-government, budget-balancing folk) castigating the President-elect for intervening in state affairs in such a way. Instead, we are witness to the homage and adoration paid by once-enemies-now-disciples such as Utah Governor Jon Huntsman, who referred to Obama’s proposal as a “refreshing sense of collaboration“. Turns out it’s easy to buy friendship, cooperation, and agreement with money… who knew?

Obama and his team of “change” are ready and willing to harvest their ever-bearing federal money tree to subsidize the expansion of state government. This effect will be an echo of what Americans have witnessed at a federal level—namely, the lack of fiscal restraint, the funding of unnecessary (and usually un-Constitutional) programs, the increased inflationary burden upon every citizen, and the continual justification spewing forth from elected sycophants.

State-level politicians have long abided by the pearl of wisdom taught them by their mothers: “money doesn’t grow on trees”. With Obama’s help, they are now disbelieving this fundamental truism and extending their pockets for a handout. America, be warned: mo’ money, mo’ problems.

20 Responses to “State Budgets Suffering Without a Money Tree”

  1. bcrockett
    December 2, 2008 at 11:37 pm #

    Mo money, mo problems.

    Nice one Connor, I think that sums up the last few months perfectly.

  2. Tim Harper
    December 2, 2008 at 11:39 pm #

    You mean…. money doesn’t grow on tree? Nahhhhhhhhhh.

    I fear that the scenario for so many people goes as follows:

    1) I’m in panic mode because health insurance is going up, I’m in debt, I’m living paycheck to paycheck, and there’s “simply not enough” (because of the way I’m living, but I find other reasons to blame to keep me from changing)
    2) The government is giving out free money to solve my problems that are victimizing me?
    3) My brain turns off as I glow with excitement of my burdens being relieved by my friend the government who watches out for me and gives me the free money that I need
    4) The opportunity to realize the cost of free money flies by unnoticed as I wallow in delight.

  3. Justin
    December 3, 2008 at 7:46 am #

    I think it would be harder for the government if money actually did grow on trees. Then they would still have to observe the law of the harvest. They would have to plant, care for, and harvest their crop.
    When they just print it – or make it just appear on a computer screen, it is much easier than growing it on a tree.

  4. Connor
    December 3, 2008 at 8:42 am #

    The latest:

    U.S. governors will ask that any federal stimulus plan for the states include as much as $100 billion in aid to help cover the swelling costs of social services, Illinois Governor Rod Blagojevich said.

    The article goes on to mention how a couple governors—including the Governator—want to balance their own books before accepting federal aid. But pray tell, once the books are balanced, what’s the need for money from the feds?

  5. bloggernacleburner
    December 3, 2008 at 9:35 am #

    Because the president totally controls US money policy. With an iron fist.

    It’s all a part of his mandate, right? Right there in the constitution?

    ooops.

  6. vontrapp
    December 3, 2008 at 10:04 am #

    Tim,
    You forgot step 0, which has two possibilities, which both lead to step 1.
    0a) I’m living it up on easy money because interest rates are low.
    0b) I’m living within my means, perhaps barely. With inflation my means lessen but my living does not.

    Without either one, we wouldn’t have a step 1. Without the fed, we wouldn’t have either step 0a or 0b!

  7. vontrapp
    December 3, 2008 at 10:06 am #

    Connor,
    You hint at it by mentioning sovereign states, but fail to drive it home. One HUGE danger in all this, perhaps even the biggest, is that now states will be more beholden than ever to the federal govt, and even more insidiously, to the FED itself, to unknown degrees. You can kiss state rights goodbye!

  8. vontrapp
    December 3, 2008 at 10:15 am #

    Oh, one more thing.
    States not only don’t have the benefit of the money tree with which to spend extravagantly like the federal government, but they also suffer, same as we do, the effects of the inflation resulting from the federal extravagance. Existing state operations become more and more costly with inflation, but states don’t have a direct pipe to the money tree. So they either raise taxes or ask for the pipe. I wouldn’t be surprised if some masterminds are rejoicing that their plan to strip away state sovereignty is working splendidly.

  9. Clumpy
    December 3, 2008 at 1:36 pm #

    Yay! Now all of the massive waste of Federal government coupled with the irresponsibility of no budget limits can be brought down to the state level! Soon everything can suck! All right!

  10. Reach Upward
    December 3, 2008 at 5:18 pm #

    Quite prophetic, Connor. Also, vontrapp is dead on about state’s rights.

    Just one other comment: Gov. Huntsman is a moderate Democrat in all but name. Don’t act so surprised at his love of the federal money train. (That’s not to say that the GOP doesn’t have its fair share of big government profligates.)

  11. Justin
    December 4, 2008 at 9:36 pm #

    Luckily, Texas — my State, will not be asking for Federal money.
    I was listening to one of our TX State Senators, Steve Ogden, speaking today and he said that 2 years ago the State of Texas had more money on surplus than the Legislator could responsibly spend, and they just put it in a “Rainy Day Fund”. Now, even with 42 States with their hand out, Texas will come into 2009 with an $11 billion dollar budget surplus.
    I’m sure Texas government isn’t doing great, but at least it’s not in line with Arnold and some of the other Governors.

  12. Connor
    December 5, 2008 at 8:53 am #

    Milwaukee residents are apparently taking things into their own hands:

    Residents from the Milwaukee neighborhoods of Riverwest and East Side are scheduled to meet Wednesday to discuss printing their own money. The idea is that the local cash could be used at neighborhood stores and businesses, thus encouraging local spending. The result, supporters hope, would be a bustling local economy, even as the rest of the nation deals with a recession.

    All they’re doing is sowing the seeds of another money tree. As Rothbard has often written, any sound money system must be based on a commodity of relatively fixed abundance to prevent anybody from having the power to massively inflate and circulate newly created “money”.

  13. Jeff T.
    December 5, 2008 at 11:40 am #

    Could we form a community that does this, Connor, correctly? Is that even legal?

  14. vontrapp
    December 5, 2008 at 11:51 am #

    Doing it correctly would require using coins, most likely, and the article says that making coins is illegal (but making paper money is not, figure that one out). Only congress has the power to coin, whatever. If we can make proper notes which are backed by gold and not counterfeitable, then I’m in on it. Maybe not a paper note at all, but something electronic, eh??

  15. Angilee
    December 5, 2008 at 2:04 pm #

    Why print local money? Just barter – like we still do at farmers’ markets and flea markets.

  16. Connor
    December 5, 2008 at 2:04 pm #

    Could we form a community that does this, Connor, correctly? Is that even legal?

    The Liberty Dollar is an interesting case study in researching the answer to your question. Ostensibly legal, yes. But as the sign on Ron Paul’s desk says, the government hates competition. And so the Feds raided the LD offices and stole all the goods. Hmm.

  17. Carborendum
    December 6, 2008 at 8:07 pm #

    It is my understanding that “competing currencies” are also outlawed in the US. The term “coin money” has been interpreted in courts (although I’m not sure if it was the SCOTUS — but it would make sense that it was) as meaning ANY form of currency.

    It is also illegal for anyone to own gold bullion without special licenses that are NOT for “coining” or backing currencies. Such licenses are for jewelers and the like. I believe the same applies to silver.

    There are ways around it like advertizing “medallions” as collectible items. Owning 24K gold jewelry is legal, just not bullion.

    There are also logistical concerns. Who has enough money to be the gold “banker”? How many people can trust such a man to keep the gold safe and available? This is what began fractional reserve in the first place. We might start over, but we’d end up going down the same path again. It just takes enough desperation and greed.

    There is also the question of how circulation of funds will keep up with a growing economy when there is no fractional reserve. Eventually, there will be a currency shortage. This is what made the fed a viable alternative in the first place.

  18. Brennan
    December 10, 2008 at 10:55 am #

    Above you quoted Gov Blagojevich…. Silly he’s now found to be corrupt. One down…..574 to go. Oh wait. 573 Ron Paul is the good one :)

  19. Greg
    July 26, 2009 at 10:57 pm #

    So, is Huntsman a Keynesian as well?

  20. Connor
    August 25, 2009 at 1:05 pm #

    Behold: further evidence that states are suffering without being able to print up their own funny money. Going into debt to give people “free” money. Borrower beware!

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